Flash memory specialist SanDisk is to pump $75 million into troubled Israeli chip maker and former NatSemi subsidiary Tower Semiconductor.

In exchange, SanDisk will gain take a ten per cent stake in Tower, with the option to take a further ten per cent, the Finacial Times reports.

Tower desperately needs money to fund a $1.5 billion reconstruction programme designed to replace the fabrication company's ageing 0.35 micron production lines with up-to-date 0.18 micron lines. The snag is, the new lines are projected to bring in just $700 million in revenues by 2005, leaving another $750 million to be found.

$10 million will come from Toshiba, which is also supplying the fabrication equipment. Tower said it hopes to raise $350 million from three strategic investors. Government financing and bank loans should, the company hopes, contribute $900 million.

SanDisk's scheme is to put around 20 per cent of its Flash production in Tower's direction. Currently, 70 per cent of its chips are made in Taiwan, the rest in Japan. ®